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Stocks 101: Stocks versus Other Investments

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1.
A good way to minimize the effects of bad timing in stock choices is to invest for the short term.
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False. A good way to minimize such effects would be to invest for the long term instead, since volatility tends to iron itself out over time.
2.
Buying shares of stock in a company gives you ownership in that company.
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True. Stock is about ownership (also called equity) and all the benefits of that ownership.
3.
Which of the following investments are the most volatile in their pricing?
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Stocks. Stocks are the most volatile. Over the long term, stocks have a higher return than bonds or savings accounts. But this volatility means that over the short term, other types of investments may significantly outperform stocks.
4.
When you buy a stock, you are _______.
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Buying an ownership interest in a company. When you buy a stock, you are buying an ownership interest in a company. Bonds are loans from companies and the government.
5.
Over the long term, which investments provide the lowest real (inflation adjusted) returns?
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Savings accounts. Savings accounts provide the lowest real (or inflation adjusted) returns over the long term.
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